Corporate tax cut to cause Tk 800cr revenue loss

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Special Correspondent :The government would get Tk 800 crore less in revenue due to deduction of corporate tax for publicly and non-publicly traded banks, insurance companies and financial institutions (FIs), officials said.It came up with the move following demands from sponsors of the private banks."The government has offered the tax cut to facilitate the banks to bring down the interest rates to single digit," a senior official at the National Board of Revenue NBR told The New Nation yesterday.According to an estimate, he said, the NBR would incur a revenue loss of Tk 800 crore in the next fiscal due to the corporate tax deduction.While presenting the national budget for fiscal 2018-19, finance minister AMA Muhith proposed to reduce corporate tax to 37.50 per cent from existing 40 per cent for the listed banks, insurance companies and FIs. He also proposed 40 per cent corporate tax for non-publicly traded banks, insurance companies and financial institutions, reducing from the existing rate of 42.50 per cent.Welcoming the government move, bankers said that it would leave a good impact on the banks' profitability."It may not help much to bring down the lending rates on bank loans. It largely depends on reduction on deposit rates," said Chairman of the Association of Bankers, Bangladesh (ABB) Syed Mahbubur Rahman.He, however, said the reduction will increase the profitability of banks. The shareholders will also get the benefit from the profit. Opposing the government move, former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed said, it can no way to help increase the banks' liquidity or reduce the interest rates and neither benefit the borrowers nor the depositors. It will largely benefit the bank directors and shareholders. "It's noting but a pervasive incentive for banks and I personally oppose the government's move. The government has provided the incentive bowing down to pressure of a powerful business syndicate," he added.Dr Salehuddin Ahmed, however, urged the government to restore good governance and discipline in the banking sector to boost investors' confidence as well as private sector investment.